Allianz Global Investors Deutschland GmbH (AllianzGI) and the life insurer Allianz Lebensversicherungs-AG (Allianz Leben) have founded a joint subsidiary, Allianz Treuhand GmbH, domiciled in Stuttgart. The new company provides an important building block for solutions surrounding the so-called "second pillar of retirement provision", the corporate pensions sector.
In connection with CTA (contractual trust arrangements) models, it serves Allianz's corporate clients as trustee, thereby facilitating the outsourcing and outfinancing of their pension obligations, thus conserving their liquidity. Joint Managing Directors of Allianz Treuhand are Marc Braun and Martin Katheder.
New trustee unit "Allianz Treuhand" founded
Marc Braun
Shield against insolvency
CTAs provide financial coverage for employers' obligations arising from corporate pensions, working time accounts or phased-in early retirement plans and at the same time shield them against insolvency. The employer transfers the assets earmarked for this purpose (so-called plan assets) to a trustee, which acts as administrator to the employer and guarantor to the entitled employees.
In this way, the employees are also protected outside of the statutory security framework (i.e. Pensionssicherungsverein) against the risk of losing their pension claims in the event that their employer should suffer insolvency and of ending up empty-handed in their old age. Allianz Treuhand GmbH is set up as a multi-employer trust and bundles the pension obligations of various companies in a CTA.
External asset manager
The transferred assets will be managed by Allianz Global Investors Advisory GmbH (AGIA), an affiliate of AllianzGI. AGIA is one of the leading asset management advisors in Germany and is subject to supervision by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), the German financial services regulator.
Integrated products based on insurance and funds
Unlike existing CTA structures, Allianz Treuhand GmbH provides integrated product solutions: Insurance, mutual funds and combinations of these can be offered from a single source. In addition, a number of tailor-made variations can be designed around the CTA structure, such as direct coverage of obligations arising out of pension commitments, working time accounts or phased-in early retirement plans.
As Allianz Treuhand Managing Director, Marc Braun, explains, "apart from enhancing their international balance sheets, companies are provided with a unique degree of flexibility and are able to get perfectly tailored cover concepts designed to address their individual situations. As all components of these individual solutions come from the Allianz production line, the cost of implementation is reduced to a minimum."
Focus on Mittelstand (i.e. small and mid-caps)
The insolvency-proof external funding of pension obligations via a CTA offers strong advantages, in particular to companies that prepare their financial statements according to international standards (such as IFRS): Considering some preconditions they benefit from what is known as balance sheet contraction. The relevant pension obligations can be taken out of the balance sheet, provided that earmarked plan assets are transferred to the CTA.
As Managing Director Martin Katheder points out, "in most cases the companies gain an upgrade with rating agencies and analysts. This makes it easier for them to obtain equity and debt capital (Basle II), which in turn can improve their international competitive position."
Martin Katheder: "In most cases the companies gain an upgrade with rating agencies"
CTA can be used flexibly
In addition, with a draft bill that in the future will also modernize accounting regulations for companies in the mid-cap sector which draw up their balance sheets according to Handelsgesetzbuch (HGB, i.e. German Commercial Code), the German Federal Government is planning to introduce the possibility of netting assets against pension obligations, provided that the obligations are clearly assigned to the assets in such a way that they are protected in the event of an insolvency.
Martin Katheder adds: "Mittelstand companies that apply international accounting rules – and that includes the German subsidiaries of major international corporations – are our most important target group. We can also devise flexible models for companies that already have their own CTA solutions and, for example, may additionally want to put their long-term-credit obligations into a CTA solution."
His colleague Marc Braun sees even more alternatives for the new CTA. "These days companies have to decide far more quickly on the sale of subsidiaries or the acquisition of stakes in other companies. If, for instance, a company selling a hived-off division is looking for an efficient method of maintaining the cover of pension obligations and the insolvency protection attributable to the separated unit, the new structure provides the ideal solution."
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